Transposition of EU regulation on public procurement

Udbudslovsudvalget Transposition of EU regulation on public procurement Country comparison of Sweden, UK and the Netherlands Final report 3 June 201...
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Udbudslovsudvalget

Transposition of EU regulation on public procurement Country comparison of Sweden, UK and the Netherlands

Final report 3 June 2014

Contents

1. Introduction 2. Summing up key points 3. Methodology and project design

4. Public procurement in Sweden, UK and the Netherlands 5. Flexible procurement procedures – findings 6. Methods and models for tender assessment – findings 7. Reduction of transaction costs – findings 8. The light regime – findings

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New public procurement directive – country comparison

© 2014 Deloitte

1. Introduction Mapping of the current procurement regime in Sweden, UK and the Netherlands and their plans for transposing the new EU procurement directive The objective of the study EU regulation of public procurement given by Directive 2004/18/EC (referred to as the current directive) has been reformed by the passing of Directive 2014/24/EU (referred to as the new directive).

Analysis themes In the assignment outline, the committee provides four analysis themes to be studied as to the interpretation and transposition of the new directive as well as the regulation of and practice using the current directive.

In Denmark, the Minister for Business and Growth has set up a committee responsible for preparing a bill transposing the new directive into Danish law. The committee wishes to include insights from other member states on the transposition of the current and new EU regulation on public procurement. This study is put forward to accomplish this purpose.

The four analysis themes are as follows:

Hence, the objective of this study is to gather knowledge about and experience with the transposition of EU regulation of public procurement in UK, Sweden and the Netherlands on four selected analysis themes. The three countries in the study and the four analysis themes of the study are provided by the committee. The study covers both the current regulation and practice as well as the interpretation and transposition strategy of the new directive with regard to the four analysis themes in the three countries. The study has been completed in a compressed timeline from April thru May 2014 gathering available information from open sources as well as insights and experience from selected key stakeholders in the three countries. Focus has been on pointing out the key points of relevance in a Danish perspective with regard to both regulation and practice in relation to the current directive as well as transposition strategy for the new directive in the three countries.

Flexible procurement procedures, which cover the competitive dialogue, the competitive procedure with negotiation and innovation partnership. Methods and models for tender assessment, which cover the use of award criteria and evaluation models, including the practice of ensuring transparency and the experience with complaints about tender assessment. Reduction of transaction costs, which covers the relationship between procurement procedures and transaction costs as well as initiatives to reduce transaction costs for both contracting authorities and private suppliers. The light regime, which covers the need to revise the existing regulation or transpose new regulation for contracts below the threshold. The findings from the study are structured around these four themes. All sections of this report introduce the background of the analysis theme, and the special focus of the study is clarified by a number of specific analysis questions.

The Danish Competition and Consumer Authority acting as secretariat for the committee has been involved in the design and completion of the project.

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New public procurement directive – country comparison

© 2014 Deloitte

2. Summing up key points Key points of relevance Relevant findings from the country comparison In Sweden, the current national regulation that covers both public procurements above and below the thresholds will be revised to transpose the new directive. In relation to the Danish transposition, the Swedish case appears to be relevant with regard to flexible procurement procedures and the light regime. The Swedish and the Danish approaches are similar to both themes, and so, regulation, guidelines and practice might provide relevant inspiration for the Danish transposition. Regarding tender assessment and the reduction of transaction costs, the Swedish authorities have taken a number of initiatives to produce guidelines that are, however, not very detailed and hands-on. In the UK, a new national regulation will be put forward by the end of 2014 to transpose the new directive into national regulation. Especially the British experience on using the competitive dialogue and initiatives to promote preprocurement market engagement to limit the use of the competitive dialogue might be relevant to the Danish transposition. Furthermore, a new procurement procedure has been piloted to promote innovation. The British case seems less relevant regarding tender assessment, reduction of transaction costs and the light regime as regulation, practice and information regarding transposition are very limited. The only exception is a list of guidelines and supporting tools making public procurement more accessible to SMEs in order to reduce transaction costs. In the Netherlands, the experience across all four analysis themes seems highly relevant for the Danish transposition. This is primarily due to the fact that a new national procurement regulation was brought into force in 2013 anticipating the new EU regulation on public procurement. The national regulation has already been put forward on a number of the changes made by the new directive. Especially relevant to mention is that innovation in public procurement is highly promoted, and that a number of hands-on guidelines have been put forward on the use of competitive dialogue. Regarding tender assessment, the Netherlands have a long tradition for using evaluation models, and useful guidelines exist on the subject. Finally, the Netherlands have developed a model to calculate transaction costs, which has been applied to the new national procurement regulation. 4

New public procurement directive – country comparison

Country comparison overview The figure below provides an overview of experience and specific solutions that might be relevant as inspiration for the Danish transposition regarding the four selected analysis themes across the three countries.  = High relevance  = Some relevance

 = No relevance

Flexible procurement procedures Regulation







Practice







Transposition







Regulation







Practice







Transposition







Regulation







Practice







Transposition







Regulation







Practice







Transposition







Tender assessment

Reduction of transaction costs

The light regime

© 2014 Deloitte

3. Methodology and project design Description of methodology, analytical framework and overall project design Basic outline of the project design The study has been completed in four steps: The four steps have been designed to give the study a consolidated methodology ensuring qualified data collection, mapping of data and I. Operationalisation of the analysis themes. conclusion of key points of relevance. II. Mapping of special focus regarding the current and the new The relevance of the key points is evaluated with regard to delivering directive. inspiration, experience and specific solutions to the Danish transIII. Studying the three countries and systemising the findings. position in relation to the four selected analysis themes. IV. Deducing key points of relevance in a Danish perspective. Below, the methodology is elaborated and illustrated for each step. These four steps provide the basic outline for the project design.

I. Analysis themes

II. Mapping

The objective of the study is to analyse the transposition of EU regulation of public procurement in Sweden, UK and the Netherlands on four analysis themes provided by the assignment outline.

The four analysis themes are to be mapped as to the interpretation and transposition of the new directive as well as the regulation of and practice using the current directive.

III. Study Interviews with key stakeholders, desk research and input from international experts provide the basis for completing the country comparison of Sweden, UK and the Netherlands.

IV. Key points Based on information from interviews, desk research and input from international experts, key focus points will be identified and evaluated on their relevance as experience for the Danish transposition activities.

The current directive

Regulation

Practice

Interpretation

Transposition

The new directive

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New public procurement directive – country comparison

© 2014 Deloitte

3. Methodology and project design Description of the data collected: interviews, desk research and the validation of data Data strategy Data for the study include the following sources: Regulation: Mapping national regulation and guidelines of public procurement. Desk research: Gathering relevant documents, i.e. guidelines and supporting tools related to the governance of public procurement in each of the three countries. International experience: Involvement of Deloitte’s international experts to lay down characteristics on each case. Interviews with key stakeholders: Interviews conducted with both the responsible public authorities and representatives of private suppliers engaged in public procurement.

Country

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Transposing authority

Interviews A central part of the data strategy of this study is the collection of information and references from key stakeholders representing both the public and the private sector. It has not been possible to get in contact with the Confederation of Netherlands Industry and Employers, and therefore the perspectives of the private sector have been put forward by Dutch Construction and Infrastructure Federation. An interview guide uncovering both regulation, practice and the transposition perspective of all four analysis themes forms the basis of the data collection. The interview guide is generic, meaning that it has been used to interview key stakeholders from both the public sector and the private sector. As a result, the study presents the views of the public authorities and private suppliers on all four analysis themes. The following key stakeholders have been interviewed in connection with the three cases (when referred to below, the name in bold will be used).

Supporting institution

Private sector representatives

The authority responsible for the transposition of the new directive did not wish to participate

Konkurrensverket (Avdelningen för stöd, Enheten för upphandlingsstöd and Internationella sekretariatet) Swedish Competition Authority

SN (Svenskt Näringsliv) Confederation of Swedish Enterprise

Cabinet Office The Procurement Policy Team

Crown Commercial Service (CCS) was unavailable because of busyness preparing the transposition

CBI (Confederation of British Industry) The Public Services Network

Ministrerie van Economische Zaken (Competition and Consumer Policy Department) Dutch Ministry of Economic Affairs

PIANOo Dutch Public Procurement Expertise Centre

Bouwend Nederland Dutch Construction and Infrastructure Federation

New public procurement directive – country comparison

© 2014 Deloitte

4. Public procurement in Sweden Introduction to general regulation, policy and institutions in Sweden General regulation In Sweden, the main rule is that the new EU directive on public procurement is transposed into Swedish law by national regulation. The current EU regulation on public procurement put forward by Directive 2004/18/EC is transposed by the Public Procurement Act referred to as LOU (Lagen om offentlig upphandling, 2007:1091). LOU is a direct transposition of the current directive, meaning that the rules of the directive are transposed into Swedish national regulation. Furthermore, chapter 2 of LOU gives the fundamental principles of non-discrimination, equal treatment, transparency, proportionality and mutual recognition that apply to all public procurements both above and below the thresholds. In addition, chapter 15 of LOU contains procedural rules for public procurement below the thresholds (among other things). These rules are referred to as Sweden’s national procurement rules. Procurement policy According to the Swedish Competition Authority (Konkurrensverket), Sweden has a strong focus on reducing transaction costs, and this has been on the agenda for some time. Over the last few years, the agenda on public procurement has focused on promoting social aspects of public contracts and promoting innovation through public procurement. With regard to both issues, focus is on procuring most efficiently and responsibly, meaning that innovation and social aspects of contracts should only be promoted when appropriate in relation to the goods and services procured.

Institutions In Sweden, contracting authorities are generally responsible for their own procurements and contracts. To support the contracting authorities when doing public procurement, Upphandlingsstödet under Kammarkollegiet has up until March 2014 been responsible for guidelines and supporting tools. The objective of Upphandlingsstödet was to provide practical guidance and support to both public sector contracting authorities and businesses regarding public procurement. This was done by developing in-depth guidelines, practical tools and presenting the latest legislation as well as promoting and accelerating the use of electronic procurement in Sweden. Furthermore, Upphandlingsstödet took on a facilitating role in relation to both contracting authorities and private suppliers engaging in specific procurement processes, especially helping SMEs participate in procurements. The aim of Upphandlingsstödet facilitating procurement processes was to reinforce the strategic importance of public procurement, prevent corruption and conflicts of interest, make it possible to carry out the entire purchase process by electronic means, achieve the objectives for long-term sustainable development and encourage procurement that promotes innovation. From 2014, Konkurrensverket has the supporting responsibility for both the current and the new directive. As a result, Upphandlingsstödet has been moved to Konkurrensverket as of March 2014.

Guidelines are widely used to help contracting authorities bring LOU into practice. With regard to other supporting tools, this has first and foremost been provided by private suppliers. 7

New public procurement directive – country comparison

© 2014 Deloitte

4. Public procurement in Sweden Introduction to systems, complaints regime and transposition in Sweden Public procurement systems In Sweden, private suppliers can find information on public procurement through a number of different procurement portals provided by private suppliers. One of the portals most widely used is TendSign provided by Visma. TendSign is an online system supporting the entire procurement process. As in all member states, procurements above the thresholds also have to be published on TED (Tenders Electronic Daily). There exists no national database for public procurement holding information on live procurement or contract information. When announcing a procurement, the contracting authorities can ask for the information to be shared between procurement portals. However, this is not always done, and Konkurrensverket is therefore developing one shared portal.

Transposition strategy According to Konkurrensverket, the Swedish transposition strategy related to EU regulation of public procurement is that the new directive is directly transposed into Swedish law by revising the existing law. The new directive is expected to be transposed into Swedish law by revising LOU. The regulation will continue to be a direct transposition of the new directive, not making any clarifications or interpretations of the EU regulation on public procurement available. This requires thorough analysis of the wording of the directive in different languages to make sure that the Swedish law regulates public procurement in the same way as the EU regulation. This makes the later interpretation of the new directive by the European Court of Justice (ECJ) directly usable to also the Swedish regulation on public procurement.

Complaints regime The Swedish complaints regime related to public procurement is based on the use of Administrative Courts dealing with, among other things, disputes between private entrants and public authorities. Procurement breaches can be brought to Administrative Courts by tenderers if they suspect the contracting authority has violated the procurement rules or principles, and if this has inflicted costs on the tenderer.

Guidelines and supporting tools in relation to the new regulations are being considered.

If the court rules in favour of the tenderer, the contracting authority can be required to adjust the procurement process or to re-tender the procurement. A ruling by the Administrative Court can be appealed to the Administrative Court of Appeal as a first instance and then to the Supreme Court.

• The Swedish Public Procurement Act – an introduction, Konkurrensverket, May 2012

Both parts of the formal proceedings pay their potential costs of the proceedings, i.e. the costs of legal advisors. The court charges no fees for the proceedings. 8

New public procurement directive – country comparison

References • LOU: Lag (2007:1091) om offentlig upphandling • Swedish Public Procurement Act, Konkurrensverket, April. 2011

• Upphandlingsreglerna – en introduktion, Konkurrensverket, September 2012 • The New Public Procurement Directives from the Swedish point of view, Konkurrensverket © 2014 Deloitte

4. Public procurement in the UK Introduction to general regulation and policy in the UK General regulation In the UK, the main rule is that the new directive on public procurement is directly transposed into UK law by national regulation. The current EU regulation on public procurement put forward by Directive 2004/18/EC is transposed by the Public Contracts Regulation 2006, which applies for England, Wales and Northern Ireland. Public procurement is a devolved power in Scotland. Furthermore, the devolved administration in Wales has some freedom to devise its own practice. The Public Contracts Regulation 2006 is a direct transposition of the current directive. There is no UK regulation on procurement below the thresholds given by the current directive. As stressed by both the CBI (Confederation of British Industry) and the Cabinet Office, the UK government’s aim is to limit the regulation on public procurement to a minimum. The reason for this is that the contracting authorities know best how to design the process to support the most effective and efficient procurement. However, there are a number of different acts and agendas that regulate the procurement process for contracts above the thresholds. With regard to transparency, the Freedom of Information Act allows unsuccessful tenderers to obtain information about the conduct of a procurement process in addition to the information, which the authority is required to provide to tenderers. Furthermore, the Transparency agenda obliges central government to publish contracts and tender documents for contracts over GBP 10,000 on Contracts Finder. With regard to procurement consciousness and responsibility, the Public Services Act 2012 obliges contracting authorities to consider how public services contracts might improve the economic, environmental and social well-being in relevant areas. 9

New public procurement directive – country comparison

Procurement policy Over the last few years, public procurement has been high on the agenda in relation to both balancing government budgets and supporting UK growth. In February 2013, the procurement policy Buying and managing government goods and services more efficiently and effectively was put forward. The objective of the policy is to save money by improving the way contracting authorities buy goods and services, including: • Creating the Crown Commercial Service (CCS) to advise and negotiate on behalf of the government and the wider public sector. • Targeting 25 % of government spending at SMEs in 2015 by making government contracts and procurement processes more accessible. • Adding details of future projects on Contracts Finder so that businesses can invest in relevant skills, labour and capabilities. CBI 2014 Public Sector Procurement Report CBI’s second annual member survey on public sector procurement has, among other things, resulted in the following recommendations to the UK government: • Use the new procurement directive regulations and training programmes to encourage a shift away from lowest price to wholelift costing and quality. • Ensure that the EU Procurement Directive transposition delivers genuinely simpler processes. • Give CCS control mechanisms to ensure that reforms are followed and implemented across the wider public sector. • Encourage a more consistent application of procurement guidelines through the Cabinet Office’s guiding and training of contracting authorities. © 2014 Deloitte

4. Public procurement in the UK Introduction to institutions, systems and complaints regime in the UK Institutions In the UK, contracting authorities are responsible for their own procurements and contracts. This has proved problematic for both contracting authorities and private suppliers as stressed by both the CBI and the Cabinet Office. According to CBI, the contracting authorities are not always competent to procure in the most efficient way with regard to both the contracts with private suppliers and their own time spent on public procurement. This also gives rise to more complex public procurement processes and higher transaction costs for private suppliers. In 2014, the government’s central commercial capabilities have been brought into a single organisation, Crown Commercial Service (CCS), amalgamating Government Procurement Service with other commercial teams from the Cabinet Office and central government departments. CCS is an executive office of the Cabinet Office with the objective to centralise commercial and procurement services for government and the wider public sector, including health, local government, devolved administrations, education and not-for-profit organisations. CCS develops procurement solutions to help the public sector buy more efficiently and effectively to improve the quality of service delivery and extract maximum value from commercial relationships between contracting authorities and private suppliers. The Cabinet Office’s Efficiency and Reform Group (ERG) is responsible for the transposition of the new EU public procurement regulation. ERG works in partnership with HM Treasury and government departments to deliver efficiencies, savings and reforms.

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New public procurement directive – country comparison

Public procurement systems In the UK, private suppliers can find information on public procurement through two different procurement portals. Contracts Finder administered by CCS holds information on live contracts over GBP 10,000, future contracts in the government pipeline as well as information on and documentation of closed contracts. The contracting authorities are responsible for updating the government pipeline. eMarketplace administered by the Cabinet Office in partnership with the Centre of Expertise and ProcServe holds information on contracts below the thresholds. Furthermore, private suppliers can enter their company information enabling contracting authorities to do spot procurement. For CCS procurements, private suppliers are to use the procurement system eSourcing Suite to place tenders. This is an online system supporting end-to-end procurement activities administered by CCS. Complaints regime The UK complaints regime related to public procurement is based on the use of formal court proceedings. Procurement breaches can be brought before the court by tenderers. However, individual companies are averse to face the costs of formal proceedings as the likely consequence of a challenge is re-tendering the procurement. Complaints on public procurement can be directed at the contracting authority itself. There is no appeals board for public procurement. As stressed by the CBI, tenderers finds that complaints directed to the contracting authority themselves are dealt with in an unreliable manner. Therefore, the Cabinet Office has launched the Mystery Shopper scheme. This allows unsuccessful tenderers to raise concerns about public procurement processes and practice to a third party. The Cabinet Office investigates concerns, and if necessary, makes recommendations. © 2014 Deloitte

4. Public procurement in the UK Introduction to transposition of the new directive in the UK Transposition strategy The UK transposition strategy related to EU regulation of public procurement is that the new directive is directly transposed into UK law by enacting new regulation. The new Directive 2014/24/EU will be transposed into UK law by a new regulation replacing the Public Contracts Regulation 2006. The transposition is to be completed by November 2014. The regulation will be a direct transposition of the new directive, not making any clarifications or interpretations available. Over the summer of 2014, Cabinet Office expects to take steps that will ease the implementation of the new regulation for private suppliers. Guidelines and supporting tools in relation to the new regulations are furthermore being considered.

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New public procurement directive – country comparison

© 2014 Deloitte

4. Public procurement in the Netherlands Introduction to general regulation and policy in the Netherlands General regulation

Procurement policy

In the Netherlands, a new national procurement regulation was entered into force in 2013.

Some of the key reasons for introducing the Public Procurement Act 2012 are:

The Public Procurement Act 2012 (Aanbestedingswet 2012) provides a national legal framework for public procurement and directly transposes the European Public Procurement Directives (Directives 2004/18, 2004/17 and 2007/66/E).

• Promotion of SME involvement, among other things, by requiring contracting authorities not to cluster and – when possible – to split up contracts in smaller parts.

The act also regulates public procurement not covered by European regulation (below the thresholds and procurement of IIB services).

In addition to the Public Procurement Act 2012, the Proportionality Guide (Proportionaliteitsgids) provides a detailed and binding guideline to ensure proportionality between the type and size of contract and the requirements to the procurement process and to private suppliers. The Proportionality Guide deals with, among other things, the choice of procedure, selection and award criteria etc.

• Proportionality between the procured contract and the choice of procedure and selection criteria (for instance demands for minimum turnover).

• Reduction of transaction costs for tenderers, among other things, through further digitisation of the procurement process (eprocurement), proportionality requirements and the use of a standard self-declaration form (Eigen Verklaring).

Furthermore, the Public Procurement Rules for Public Works 2012 referred to as ARW 2012 (Aanbestedingsreglement Werken) is another binding guideline specifically dealing with procurement below the European thresholds within the public works sector (construction and infrastructure, not IIB services). The ARW 2012 adapts the European procedures for procurement below the thresholds, but with fewer rules (for instance different requirements for preannouncements and deadlines). The Proportionality Guide and the ARW 2012 follow what is called the apply-or-explain principle, which means that contracting authorities are to apply these specific rules unless they are able to motivate why the rules do not apply in a specific procurement process.

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New public procurement directive – country comparison

© 2014 Deloitte

4. Public procurement in the Netherlands Introduction to institutions, systems and complaints regime in the Netherlands Institutions In the Netherlands, public procurement is highly decentralised with contracting authorities responsible for their own procurements. As in Denmark there is no single national agency that coordinates public procurement, e.g. for all government ministries and/or for the regional/municipal level. The Director-General Energy, Telecom and Competition under Ministerie van Economische Zaken is responsible for public procurement with regard to both legislation and execution. PIANOo (Professioneel en Innovatief Aanbesteden, Netwerk voor Overheids-opdrachtgevers) is a Dutch public procurement expertise centre. The objective of PIANOo is to professionalise procurement and tendering in all government departments with a view to improving efficiency and compliance with the rules. PIANOo is part of Ministerie van Economische Zaken. The Dutch Authority for Consumers and Markets (ACM) is tasked with monitoring unfair competition in public procurement and can impose fines on contracting companies. ACM also works with PIANOo to advise contracting authorities.

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New public procurement directive – country comparison

Public procurement systems TenderNed (www.tenderned.nl) is a procurement portal and an online procurement system provided by PIANOo. All (pre)announcements of tenders (national or European) must be advertised through TenderNed. TenderNed also offers full digital support for the procurement process. Complaints regime There is no administrative complaints board. Generally, complaints are brought before the civil courts. However, the Public Procurement Act 2012 also includes additional (non-binding) complaints procedures applicable during the procurement process. Contracting authorities are encouraged to set up temporary informal complaints review commissions to address complaints during procurement procedures. In addition, tenderers can also submit a complaint to the newly established National Public Procurement Expert Commission (Commissie van Aanbestedingsexperts) who provides non-binding advice.

© 2014 Deloitte

4. Public procurement in the Netherlands Introduction to transposition in the Netherlands Transposition strategy The Public Procurement Act 2012 and the accompanying Public Procurement Rules for Public Works 2012 and Proportionality Guide are still in their initial implementation phase. According to Ministrerie van Economishe Zaken, the regulatory framework currently under implementation has anticipated the new European procurement directive on many accounts. Therefore, no major overhaul of the current rules and regulations is expected, besides the strict transposition of the new directive and the specific policy choices.

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New public procurement directive – country comparison

© 2014 Deloitte

5. Flexible procurement procedures – introduction Background and special focus theme I: Flexible procurement procedures Background The selected flexible procurement procedures under scrutiny in this study are: • The competitive dialogue. • The negotiated procedure with prior publication defined in the current directive. • The new innovation partnership procedure introduced with the new procurement directive. Generally, these flexible procurement procedures are intended for public procurement when it is uncertain whether the market is able to live up to the requirements, when the contracting authority is not able to specify the solution needed in terms of technical specifications, price, risk etc. or when the goods and services have to be developed to meet the needs of the contracting authority. The new EU procurement directive (2014/24/EU) with regard to the flexible procurement procedures under scrutiny ‘follow a “tool box approach” which gives contracting authorities more flexibility, greater options and new routes to procurement. They have much greater freedom to choose the type and design of procedure best suited to their needs’*. This includes more flexible access to use procedures involving negotiations (including competitive dialogue and negotiated procedure with prior publication). The new procurement directive also introduces a new procurement procedure called innovation partnership, which allows contracting authorities to procure highly innovative solutions by offering a combination of research services and purchase elements. With the current directive, such procurement took place with various procurement procedures, among others competitive dialogue and the negotiated procedure. *Factsheet No. 3: Simplifying the rules for contracting authorities, European Commission 15 New public procurement directive – country comparison

Special focus Relevant challenges in Denmark related to the selected flexible procedures include how to ensure appropriate use of flexible procedures and how these are put to use most effectively. It is to be studied what measures can be taken to reduce unnecessary complexity and transaction costs when using flexible procedures. Furthermore, the study is to identify the best practice with regard to the promotion of innovation in public procurement to take inspiration from when implementing the new innovation partnership procedure. To be used as inspiration for the ongoing Danish transposition of the new directive, the study is focused on the following aspects: •

What is the experience when using the selected flexible procedures in terms of, e.g., transaction costs, the need for compensation and the experienced quality of contract delivery?



What is best practice on how to ensure that flexible procurement procedures are used appropriately?



Which ideas/plans exist for ensuring the appropriate use of the three selected flexible procedures now that the new directive gives contracting authorities more flexibility to choose the procurement procedure best suited for their needs?



What is best practice with regard to the promotion of innovation in public procurement to build upon when implementing the new innovation partnership procedure?

© 2014 Deloitte

5. Flexible procurement procedures – three subthemes The three subthemes and initial overview of the relevance of findings Relevant findings on flexible procurement procedures In Sweden, the UK and the Netherlands, the national regulation on flexible procurement procedures is a direct transposition of the current EU directive. However, the use of competitive dialogue and the negotiated procedure differs between the three countries In Sweden, the negotiated procedure is more widely used than the competitive dialogue. A range of guidelines are found for both procedures. However, they are not specific enough and more detailed guidelines are being considered to support the contracting authorities’ use of these more complex procedures and to lower the transaction costs of private suppliers who engage in these procedures. In the UK, competitive dialogue is widely used. However, the government wishes to limit the use of competitive dialogue and instead promote the open procedure with pre-procurement market engagement. The Cabinet Office has published a number of guidelines and supporting tools to support this transformation. The use of the negotiated procedure is very limited, and government guidelines wish to further restrict the use to procurements related to defence. This approach to the flexible procedures is maintained regardless of the transposition of the new directive. In the Netherlands, the competitive dialogue is rarely used and the negotiated procedure even less (except in the utilities sector). Most experience with competitive dialogue is gained in connection with procurement of very large contracts (infrastructure). However, in the past few years, the application of the competitive dialogue procedure has increased, which could be explained by a practical guideline made available in 2009. With regard to innovation, there is a strong agenda for promoting innovation in Sweden, and some guidelines have been made, but the effects are not clear yet. In the UK, a supporting tool has been piloted to promote innovation in public procurement. In the Netherlands, there is a strong focus on innovation in procurement, and a number of different policy tools have been implemented. Rijkswaterstaat, the biggest public contractor, has an official Innovation Driven Purchasing Policy. 16

New public procurement directive – country comparison

Flexible procurement procedures overview The figure below gives an overview of experiences and specific solutions which might be relevant as inspiration for the Danish transposition with regard to the flexible procurement procedure. The relevant key points will be summed up on page 26. The findings from which the key points are concluded will be presented in the following section.  = High relevance

 = Some relevance

 = No relevance

Competitive dialogue Regulation







Practice







Transposition







Regulation







Practice







Transposition







Regulation







Practice







Transposition







Negotiated procedure

Innovative partnership

© 2014 Deloitte

5. Flexible procurement procedures – Sweden National regulation, guidelines and other supporting tools of flexible procurement procedures in Sweden Regulation on flexible procurement procedures Chapter 4 of LOU on award procedures transposes the rules on procurement procedures given by the EU regulation of public procurement. There is no regulation of innovation in LOU. Articles 9-21 regulate the competitive dialogue. The circumstances under which the competitive dialogue can be used are limited to particularly complex contracts or if it has not been possible to select a winning tenderer using the open or restricted procedure. A complex contract is loosely defined as a procurement for which the technical tools fulfilling the needs being asked for by the contracting authority are objectively hard to define. Furthermore, the contract is complex if the legal or financial aspects of the project are impossible to define at the time of procurement. Guidelines on the use of competitive dialogue are available, but they are not very comprehensive. In practice, it is always up to the contracting authority to interpret LOU to determine if competitive dialogue is appropriate to use in the specific procurement process.

Guidelines and other supporting tools Guidelines on the use of competitive dialogue and the negotiated procedure are available, but they are not very comprehensive. Furthermore, guidelines on the promotion of innovation in public procurement are available. As of 1 March 2014, all supporting activities on public procurement are centralised in Konkurrensverket, including information and guidelines on public procurement. Up until now, guidelines have been published by Upphändlingsstödet under Konkurrensverket and are therefore available on http://www.upphandlingsstod.se/. Konkurrensverket will build a new tool for guidelines that also includes electronic support for the entire procurement process. To some extent this is available today with TendSign from Visma (a commercial company) on http://www.tendsign.com/. However, Konkurrensverket wishes one comprehensive system supporting all contracting authorities and private suppliers in public procurement.

Articles 2-4 regulate the negotiated procedure with prior publication of a contract notice. The law regulates in detail how and when the negotiated procedure can be used, what can be negotiated, what the limitations are and what must be fulfilled for the process to be considered fair to all parties. Official guidelines like those described above for competitive dialogue are also available with regard to the negotiated procedure. As this procedure is more widespread than competitive dialogue, there is also a wide range of third party support available from consultancies and specialised law firms paid for by either the contracting authorities or private suppliers dependent on who receives the service.

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New public procurement directive – country comparison

© 2014 Deloitte

5. Flexible procurement procedures – Sweden The current use of flexible procurement procedures in Sweden Use of competitive dialog The use of competitive dialogue is very limited in Sweden. Only 25 out of about 20,000 contracts tendered in 2012 used competitive dialogue as the procurement procedure. However, the number has gone up from no contracts tendered using competitive dialogue in 2009 and only 8 contracts tendered using competitive dialogue in 2010. Statistics for public procurement in Sweden can be found in ‘Siffror och fakta om offentlig upphandling’ (Repport 2013:9, Konkurrensverket). Konkurrensverket explains the limited use of competitive dialogue with the fact that it is most often used in relation to infrastructure and healthcare projects. It is a time consuming process, and every year, only a limited number of projects are big enough to use competitive dialogue. Furthermore, competitive dialogue is a very complex procurement procedure, and Konkurrensverket stresses that contracting authorities call for more specific guideline on how to run a competitive dialogue.

According to Konkurrensverket, private suppliers find the transaction costs of engaging in a competitive dialogue high. Even though private suppliers are familiar with a procurement process very similar to the competitive dialogue from engaging with other companies in the private sector, they are reluctant to take part in competitive dialogue because it is a publicly regulated procurement process. Private suppliers are therefore only inclined to participate in a competitive dialogue if it holds a reasonable business case for them. To lower the transaction costs, the number of private suppliers engaged in a competitive dialogue is in practice limited to 3-5 suppliers, but no such limit is put forward by the national legislation.

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New public procurement directive – country comparison

Opportunities and constraints using competitive dialogue According to SN (Svenskt Näringsliv), the limited use of competitive dialogue can be explained by the fact that competitive dialogue is perceived as having a high risk of resulting in complaints from unsuccessful tenderers. Contracting authorities are willing to run a more lengthy procurement process rather than taking the risk of losing an appeal due to use of the competitive dialogue. SN stresses that the competitive dialogue in some procurements can be found to lead to better solutions than procurement using the open or restricted procedure, and that this is not taken into consideration by contracting authorities to the extent that it ought to be. Konkurrensverket acknowledges that competitive dialogue should be promoted among contracting authorities who are inclined to use the open or restricted procedure with pre-procurement market engagement instead. It is necessary to clarify how engaged the market can be prior to procurement without violating the EU regulation on public procurement and when competitive dialogue is appropriate to use.

Complaints on competitive dialogue According to SN, competitive dialogue is perceived as having a high risk of appeals from unsuccessful tenderers. Procurement lawyers usually point to the fact that there are few court cases providing guidance on how LOU should be interpreted regarding competitive dialogue.

National regulation and guidelines probably help by explaining how competitive dialogue can be used, but the risk of legal proceedings keeps contracting authorities from using the procedure. © 2014 Deloitte

5. Flexible procurement procedures – Sweden The current use of flexible procurement procedures and the transposition of the new directive in Sweden Use of the negotiated procedure In Sweden, the negotiated procedure is more widely used than the competitive dialogue. Out of just under 20,000 contracts tendered in 2012, 563 of these used the negotiated procedure. Furthermore, the number has gone up from 362 contracts tendered using the negotiated procedure in 2009. However, it should be noted that the negotiated procedure only accounts for 3 % of the contracts tendered in 2012. According to Konkurrensverket, the limited use of the negotiated procedure can be attributed to the fact that the courts in a number of cases have ruled that the circumstances, under which the negotiated procedure can be used, were not met, and that the open or restricted procedure is to be used instead. Konkurrensverket is preparing initiatives to make contracting authorities more confident about using the negotiated procedure, e.g. they are preparing a step-by-step guideline on how to do a negotiation ensuring that no information is given to competitors and limiting what is the subject of the negotiation. According to Konkurrensverket, the negotiated procedure is used in all sectors. Whether or not the procedure is used depends on the complexity of the contracts. SN stresses that the negotiated procedure is the most common procedure when it comes to more complicated projects such as complex IT procurements and other situations in which technology is applied to solve a problem. According to Konkurrensverket, the negotiated procedure is furthermore perceived as a way of promoting innovation in procurement.

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Innovation in public procurement Konkurrensverket is responsible for promoting innovation in public procurement. This is done by guidelines, but also by going into specific projects to promote innovation. Sweden has a strong agenda in connection with the promotion of innovation in public procurement, but the level of innovation is not as high as wished for yet. Both SN and Konkurrensverket find private suppliers unable to deliver innovative goods and services, as the contracting authorities have a tendency to over-specify the contracts. According to Konkurrensverket, 20-30 municipalities and organisations are engaged in procurements promoting innovation to some degree. Not many of these projects have not been competed yet, and therefore the effect of innovation in public procurement is not clear. Transposition process and strategy A committee is preparing the transposition of the new directive by revising the existing procurement regulation given by LOU. It is expected that the wording of the Swedish regulation will be very close to the wording of the directive aiming at a direct transposition. The authority responsible for the transposition of the new directive did not wish to participate in the interview, as they are to file a report on the transposition of the new directive on 1 July 2014. It has therefore not been possible to gather further information on the exact transposition strategy. References • Siffor och fakta om offentlig upphandling – statistik om upphandlingar som genomförts under 2012, Konkurrensverket Rapport 2013:9 © 2014 Deloitte

5. Flexible procurement procedures – the UK National regulation, guidelines and other supporting tools of flexible procurement procedures in the UK Regulation on flexible procurement procedures The flexible procurement procedures are regulated in part 3 of the Public Contracts Regulations 2006 on procedures leading to the award of a public contract. The regulation on both competitive dialogue and the negotiated procedure is a direct transposition of the regulation given by the current directive. Regulation 18 limits the use of competitive dialogue to particularly complex contracts where the contracting authority is not able to define the technical means, the legal or the financial make-up of the project. Consequently, the competitive dialogue procedure can be used when the contracting authority is unable to determine its requirement specification and complete the Invitation to Tender (ITT) without discussing its needs in detail with private suppliers. Furthermore, the competitive dialogue procedure can be used when the solution is particularly complex and will require dialogue with tenderers to conclude. Regulation 17 limits the use of the negotiated procedure to contracts of genuinely unique types of solutions where the funding model is untested and the contracting authority is not aware of other contracts using a similar model. It is stressed that the negotiated procedure should not be used when it is appropriate to use competitive dialogue. Furthermore, the Defence and Security Public Contracts Regulations 2011 (DSPCR) stresses that the negotiated procedure is uniquely suited to defence and security sectors.

The Public Contracts Regulations 2006 does not regulate innovation in public procurement. However, a new procurement procedure called Forward Commitment Procurement (FCP) is being piloted. The objective of FCP is to promote innovation by bringing the private sector and the Environmental Innovations Advisory Group together to bring new cost-effective goods and services into the market. 20

New public procurement directive – country comparison

Guidelines and other supporting tools With the enactment of the current directive, the competitive dialogue procedure was promoted by the UK government. The Cabinet Office stresses that the political attitude towards competitive dialogue has changed over the last few years. To allow for more private suppliers to tender for public contracts and make the procurement process less complex and more accessible to SMEs, the open procedure with preprocurement market engagement is preferred to competitive dialogue by the minister responsible. The Cabinet Office has published guidelines promoting this change. A presumption against competitive dialogue put forward in the Public Procurement Note ‘Procurement Supporting Growth: Supporting Material for Departments’ further limits the use of competitive dialogue. Competitive dialogue is only to be used for particularly complex projects either holding an iterative design element, requiring some form of planning permission, or holding a complex commercial arrangement (joint venture, mutuals etc.), a private finance element or some other form of PPP (Public Private Partnership). If departments, executive agencies and non-departmental public bodies wish to use the competitive dialogue procedure they furthermore must seek approval from their Accounting Officers. In addition, competitive dialogue can still be used when the contracting authority has engaged the market pre-procurement, but is still unable to identify the technical means of the project.

The Cabinet Office has published a myth busting factsheet that gives contracting authorities methods of engaging with the market preprocurement not violating the EU procurement regulation. Furthermore, the Cabinet Office has published a LEAN Sourcing Standard Solution providing contracting authorities with ground principles for public procurement. © 2014 Deloitte

5. Flexible procurement procedures – the UK The current use of flexible procurement procedures in the UK Use of competitive dialog and the negotiated procedure Competitive dialogue is perceived as widely used by both CBI and the Cabinet Office. The Cabinet Office points to the long tradition in the UK for market engagement in public procurement as the reason for this. Furthermore, competitive dialogue is the procurement procedure most often used in PPP. There are no statistics available for the use of competitive dialogue and the negotiated procedure. CBI, on the other hand, stresses that contracting authorities act riskaverse by choosing competitive dialogue over the open procedure with pre-procurement market engagement when it is not possible to complete the requirement specifications without involving the market. Contracting authorities are not clear on the limits of pre-procurement market engagement under the EU regulation. Accordingly, competitive dialogue is perceived as the procurement procedure providing the contracting authorities maximum cover and is therefore favoured. As accounted for, the UK government wishes to limit the use of competitive dialogue by promoting the open procedure with preprocurement market engagement. The hope is to lower the transaction costs for both contracting authorities and private suppliers making the public procurement process less complex and more accessible to SMEs. It is stressed by the Cabinet Office that reduced use of competitive dialogue should not result in greater use of the negotiated procedure.

The negotiated procedure is perceived as rarely used by both CBI and the Cabinet Office. CBI points to fact that the legal framework and guidelines put more restrictions on the use of the negotiated procedure than the competitive dialogue.

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Innovation in public procurement CBI perceives innovation as promoted indirectly in public procurement as a result of a general perception among both contracting authorities and private suppliers that an effective market will deliver the most innovative product. Furthermore, the FCP scheme promotes best practice for innovative procurement among contracting authorities by publishing guidelines and making case studies accessible online on the number of cases using FCP. However, no statistics are available for the use of innovation in public procurement. CBI stresses that contracting authorities have a tendency to overspecify ITTs preventing private suppliers from delivering innovative solutions. The contracting authorities tend to focus on output instead of outcome, meaning the content of the contract instead of what is actually delivered to make procurement measureable.

References • The Public Contracts Regulation 2006, www.legislation.gov.uk • Quickguides – UK Public Procurement, Ashurst LLP Oct 2012 • Procurement policy note 05/13, Further progress update on the Modernisation of the EU Procurement Rules, Cabinet Office July 2013 • Procurement policy note 04/12, Procurement Supporting Growth: Supporting Material for Departments, Cabinet Office May 2012 (holds the Presumption against Competitive Dialogue and the myth busting factsheet on Pre-Procurement Engagement)

© 2014 Deloitte

5. Flexible procurement procedures – the UK Transposition strategy and interpretation of the new directive in the UK Perceived possibilities and constraints The Cabinet Office raises the concern that the use of the negotiated procedure may increase, as the new directive widens the access for contracting authorities to choose between competitive dialogue and competitive procedure with negotiation.

Transposition process and strategy The transposition of Directive 2014/24/EU is to be completed by November 2014. Both CBI and the Cabinet Office perceive this as if UK firms are given a competitive advantage compared to other EU private suppliers.

The Cabinet Office will not regulate the use of the procurement procedures further than what is the case with the current national regulation. The contracting authorities are free to choose the procurement procedure most suited for their contract with regard to the restrictions given by the EU regulation on public procurement.

The Cabinet Office is preparing a new regulation to directly transpose Directive 2014/24/EU. This includes deciding on the options left for the member states in the EU procurement regulation. The Cabinet Office is in the process of clarifying the actual content of the new regulation.

The CBI stresses that innovative partnership can improve the procurement procedure so that private suppliers to a wider extent are able to deliver the most innovative product.

During the summer of 2014, the Cabinet Office expects to take steps to ease the implementation of the new regulation for private suppliers, e.g. online learning tools to communicate the new rules of the new directive will be transposed into national legislation.

The Cabinet Office has no clear expectations as to the use of innovation partnership, and at this point, no guideline nor other supporting tools are being prepared to promote innovation partnership.

At this point, the Cabinet Office has no clear view of which guidelines and supporting tools will be prepared to supplement the transposition of the new directive.

References • Forward Commitment Procurement – Practical Pathway to Buying Innovative Solutions, Department for Business, Innovation and Skills 2011 • Introduction to Innovation and Forward Commitment Procurement, Department for Business, Innovation and Skills • A suppliers guide to Forward Commitment Procurement, Department for Business, Innovation and Skills • Forward Commitment Procurement in practice, Department for Business, Innovation and Skills

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5. Flexible procurement procedures – the Netherlands National regulation, guidelines and other supporting tools of flexible procurement procedures in the Netherlands Regulation on flexible procurement procedures Competitive dialogue and the negotiated procedure are regulated in the Public Procurement Act 2012. This act transposed the directive directly. The access to these two procedures is further restricted through the Proportionality Guide, which states that it ‘often can be better’ to carry out a normal procurement procedure with a foregoing market consultation than choosing one of these ‘special procedures’. Both procedures are available for procurement below the thresholds. The contracting authority is required to motivate the choice of procedure and the requirements in the Proportionality Guide which apply to the competitive dialogue and the negotiated procedure. According to Ministerie van Economische Zaken, no specific policy or implementation initiatives have been introduced to promote the competitive dialogue and the negotiated procedure. In general, the competitive dialogue can be applied when procuring highly complex products/services. The contracting authority must be able to prove that circumstances allow for the use of this procedure, for example what makes the product/service ‘highly complex’. According to PIANOo, the current definition of ‘highly complex’ is considered rather vague, creating uncertainty among contracting authorities. In practice, the negotiated procedure can be applied when it has not been possible to select a winner of a tender, when the total price or specifications cannot be estimated or when the product/service is research or development.

Guidelines and other supporting tools A practical guideline for contracting authorities on competitive dialogue is available through the PIANOo website (in both Dutch and English). The guideline is based on practical experience. There is no specific guideline for the use of the negotiated procedure. A number of guidelines and supporting tools are available through PIANOo and Netherlands Enterprise Agency (RVO.nl) to support the promotion of innovation through procurement and the procurement of innovative solutions. • The SBIR scheme is a tried and tested method that originated in the USA. The instrument is used to provide incentives for companies to develop and market innovative solutions to societal issues. • Innovation-driven procurement is promoted by the Dutch government to support contracting authorities to design their tenders to achieve innovative solutions within the framework of tendering rules. The NL Agency offers guidance to the tender process. • The Innovation Driven Purchasing Policy of Rijkswaterstaat must promote innovation through procurement and the application of innovative solutions among private suppliers and knowledge institutions. There is a requirement to make 2.5 % of the total purchasing budget.

There is no specific regulation to promote innovation in public procurement, but the Dutch government has set a goal that 2.5 % of all public purchasing should be spent on innovation-driven purchasing. Rijkswaterstaat (part of the Dutch Ministry of Infrastructure and the Environment), the largest public purchaser has an official Innovation Driven Purchasing Policy (see opposite). 23

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© 2014 Deloitte

5. Flexible procurement procedures – the Netherlands The current use of flexible procurement procedures in the Netherlands Use of competitive dialogue There is a general reluctance to apply competitive dialogue among most contracting authorities (especially regional authorities and municipalities), and therefore the procedure is only rarely used. According to PIANOo, this can be explained by the restrictions put on the use of competitive dialogue, which increases the contracting authorities’ risk of complaints and lawsuits compared to other procedures. Furthermore, competitive dialogue is perceived as a very complex and time consuming procedure that entails high transaction costs. It is a voiced concern among private suppliers that specialised knowledge can be leaked during the process. Last year, the procedure was applied in 34 procurement processes of which 31 were European and 3 national. 2/3 of these procedures were within the public works sector and approximately 1/3 within other sectors (mainly services). In 14 out of the 34 cases, the procedure was applied by a municipality and in 8 cases by a central government agency. The competitive dialogue is for instance used to award DBFM(O) contracts (design-build-finance-maintain-(operate)). The Dutch government has standardised the public DBFM(O) contract terms and the tender guidelines for these procurement proceedings.

The procedure has been available (also below the thresholds) since 2004. In the last 3-4 years, its use has increased some, which according to PIANOo might be explained by the practical guidelines that appeared in 2009. The procedure is now also applied to the procurement of smaller contracts. It is likely that contracting authorities, which have applied the procedure once, are less reluctant to use it again. When the procedure is applied to larger contracts, tenderers are offered compensation. 24

New public procurement directive – country comparison

Use of negotiated procedure The procedure has been available (also below the thresholds) since 2004, but almost only used within the utilities sector. There is a general reluctance among contracting authorities to apply the negotiated procedure to procurement outside the utilities sector. Last year, the procedure was applied in 144 procurement processes, of which 115 were within the utilities sector. Generally, less than 1 % of contracts outside the utilities sector is procured using the negotiated procedure.

Innovation in public procurement Between 2005-2010, 28 competitions were carried out as part of the SBIR scheme with a total contract value of EUR 59.6m by central departments. There was a general satisfaction with the results and the efficiency of the process facilitated by the NL Agency. The development of innovation-driven procurement has received significant attention in recent years, especially with regard to sustainability within infrastructure and energy efficiency. The procurement of 6 contracts is used as examples in a practical guideline. Procedures applied in these 6 examples are: SBIR, European tender with advance technical dialogue, design contest and launching customer. According to PIANOo, innovation-driven procurement has been a particular issue when awarding DBFM contracts. Rijkswaterstaat under the Ministry of Infrastructure and the Environment is seen as the role model within this field. © 2014 Deloitte

5. Flexible procurement procedures – the Netherlands Transposition strategy and interpretation of the new directive in the Netherlands Perceived possibilities and constraints The interpretation by both PIANOo and Bouwend Nederland is that competitive dialogue and the procedure with negotiation will be much more accessible with the new EU procurement directive, than what is currently the case, and that this provides opportunities for better quality contracts. However, according to PIANOo, there is a broad understanding among stakeholders that there will be a need to further define under which conditions the competitive dialogue and the negotiated procedure will be applicable.

Transposition process and strategy Many of the changes in the new EU procurement directive were anticipated with the extensive changes introduced in 2013 and currently under implementation. It is therefore expected that the new procurement directive will be transposed into national regulation with as few changes as possible to the current regulation. Ministerie van Economische Zaken is organising a series of discussions with contracting authorities and private suppliers on this specific topic. Here the policy choices will also be discussed. A decision on the transposition is expected before the end of 2014.

The expectation is that the trend of increased use of competitive dialogue (also for smaller contracts) will continue because of the good examples and the more flexibility for contracting authorities to choose the procurement process best suited to their needs. It is expected that the negotiated procedure will be used more often outside the utilities sector, and that there is valuable experience to draw from its current application in the utilities sector. PIANOo is expecting to develop supporting tools based on this experience (in particular in cooperation with ProRail (responsible for the maintenance of the Dutch railway infrastructure). With the new procedure innovation partnership, there will be more possibilities of promoting innovation with public procurement. The new procedure is expected to fill out an important gap. With this procedure it will for instance become possible to develop alliances with private suppliers which can be stopped at short notice. However, the new procedure is vaguely defined within the procurement directive. Therefore it is expected that most contracting authorities will await applying the procedure until a couple of the large procuring authorities (maybe Rijkswaterstaat) have made their first experience. 25

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References • Rijksoverheid 2009: Competitive dialogue. A guide based on the current experience of the Rijksgebouwendienst, Rijkswaterstaat and the Ministry of Defence • PIANOo 2011: Procurement for Innovative Proposals • PIANOo 2011: Practical lessons: Innovation-driven procurement • NL Agentschap 2011: SBIR. The power of public procurement: Innovative solutions to societal challenges © 2014 Deloitte

5. Flexible procurement procedures – key points Regulation In Sweden, UK and the Netherlands, the national regulation on flexible procurement procedures is a direct transposition of the current EU directive. In Sweden, there is a range of guidelines on both competitive dialogue and the negotiated procedure, but these are not very comprehensive. Plans are made to provide step-by-step guidelines, but none are available at this moment. In the UK, a number of guidelines and supporting tools have been put forward to limit the use of competitive dialogue and instead promote the open procedure with preprocurement market engagement. In the Netherlands, competitive dialogue and the negotiated procedure are restricted through the Proportionality Guide. There are practical guidelines available for competitive dialogue and the promotion of innovation. Both UK and the Netherlands have concrete guidelines and supporting tools promoting innovation in public procurement.

Practice The use of competitive dialogue and negotiated procedure differs significantly among the three countries. In Sweden, the negotiated procedure is mostly used for complex contracts while the use of competitive dialogue is very limited. The planned step-by-step guidelines are to widen the use of competitive dialogue and the negotiated procedure and reduce transaction costs. In the UK, the use of competitive dialogue is very widespread, but is to be limited to reduce the transaction costs and make public procurement accessible to SMEs. The use of the negotiated procedure is very limited and is to be limited further. A new procurement procedure to promote innovation has been piloted. In the Netherlands, the competitive dialogue is rarely used, and the negotiated procedure even less. In the last few years, the application of competitive dialogue has increased, which could be explained by a new practical guideline. In a number of projects, innovation has been promoted using the guidelines and supporting tools.

Transposition The transposition strategy for the new directive differs significantly among the three countries. In Sweden, LOU is expected to be revised by directly transposing the new directive based on a thorough analysis of the wording. However, this has not been done yet, so there is no experience to be drawn at this point. In the UK, a new regulation will be put forward to directly transpose the new directive into UK law by November 2014. A range of guidelines and supporting tools are being prepared on the new public procurement regulation to prepare the private suppliers for the new rules. In the Netherlands, many of the changes in the new EU procurement directive were anticipated with the new set of regulations from 2013. The new procurement directive is expected to be transposed with as few changes as possible to the current regulation. There is a broad understanding among stakeholders that there will be a need to further define the access to flexible procedures.

Overview

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Regulation







Practice







Transposition







 = High relevance  = Some relevance  = No relevance © 2014 Deloitte

6. Methods and models for tender assessment – introduction Background and special focus theme II: tender assessment Background Tender assessment refers to award criteria and evaluation models. Under the current directive, the award criterion can be either the lowest price or the most economically advantageous tender (MEAT). It is required that sub-criteria to the MEAT criterion are linked to the subject of the contract and announced prior to the tender assessment. Furthermore, the weighting of the criteria should be announced.

Special focus Relevant challenges in Denmark with regard to tender assessment include the application of MEAT and specific evaluation models for the assessment of the received tenders. Such models are to ensure transparency and provide an effective tool to evaluate tenders. Finally, complaints – often concerned with the tender assessment – are consuming a lot of resources.

There is no EU regulation on how to design the specific model for the assessment of the tenders. Hence, the contracting authority is free to choose sub-criteria and weighting of criteria in relation to the announced award criterion and to further select a model for assessment/scoring. It is not required that the evaluation model is announced prior to the tender assessment. Case law has determined that the evaluation model is to be based on the basic principles of equal treatment, proportionality, transparency etc., and that the contracting authority is to be able to account for the evaluation model being used.

To be used as inspiration for the ongoing Danish transposition of the new directive, the study is focused on the following aspects: • What is best practice on how to ensure effective and transparent tender assessment? • Are there any plans on how to transpose the new procurement directive, i.e. with regard to the use of LCC considerations in the tender assessment? • What is best practice in order to limit the amount of complaints?

The tendency of complaints differs with the different complaints regimes implemented in the member states mirroring the fact that there is no detailed EU regulation on complaints. The new directive gives the contracting authorities free choice of award criteria, not requiring them to be linked to the subject of matter. Furthermore, the new directive introduces new possibilities with regard to award criteria. The contracting authority can require a specific label to prove what the goods or services are to live up to with regard to social, environmental or other standards, it can take into account the qualifications and experience of staff assigned to perform the contract, and it can emphasise LCC (lifecycle costs) of the tenders. The new directive provides no changes to the regulation of evaluation models.

Tender assessment overview The figure below provides an overview of experience and specific solutions that might be relevant as inspiration for the Danish transposition with regard to methods and models for tender assessment. The relevant key points will be summed up on page 35. The findings from which the key points are concluded will be presented in the following section. Regulation







Practice







Transposition







 = High relevance 27

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 = Some relevance

 = No relevance © 2014 Deloitte

6. Methods and models for tender assessment – Sweden National regulation, guidelines and other supporting tools, current use and transposition of tender assessment in Sweden Regulation on award criteria and evaluation models Chapter 12 of LOU on awarding of contracts directly transposes the rules on award criteria of the current directive. Hence, award criteria and the weighting of these are always to be announced prior to tender assessment. LOU provides no regulation on the specific models for assessment of tenders. However, the fundamental principles of public procurement are to be considered in relation to both the award criteria, the weighting of these and the specific evaluation model. In addition to this, SN stresses that it is always to be clear to the private suppliers how their tenders will be scored, otherwise the contracting authorities leave themselves wide open to complaints from unsuccessful tenderers. Guidelines and supporting tools There are guidelines from Kammarkollegiet on award criteria, but not on evaluation models. According to Konkurrensverket, contracting authorities rely on experience and are reluctant to use new or unknown award criteria or evaluation models. Contracting authorities use their network to gather experience with different models of tender assessment. Konkurrensverket wishes to gather this best practice and make it available to contracting authorities through guidelines. Transposition process and strategy According to Konkurrensverket, the new directive and so the new regulation of award criteria are expected to be directly transposed into Swedish law by revising LOU. Furthermore, no plans known to Konkurrensverket are made to further regulate neither award criteria nor evaluation models.

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Use of award criteria and evaluation models MEAT is the most used award criterion in Sweden as it was used in 48% of all announced public procurements in 2012. No statistics are available on the use of evaluation models. SN stresses that the choice of award criteria relies on the contracts. The lowest price is most often used for simple procurements and MEAT is used for more complex contracts. Konkurrensverket adds that procurement of services most often use the MEAT criterion. According to Konkurrensverket, there are two types of scoring models when evaluating tenders. The relative model where the score depends on how good the tender is compared to the other tenders, and the absolute model where each tender is rated on an absolute scale. The scoring of tenders can rely on both quantitative and qualitative measures, i.e. based on interviews or case studies. The court has accepted the use of qualitative measures as long as it is clear to the contracting authorities on what grounds the tender will be evaluated.

Both SN and Konkurrensverket find that the evaluation models often combine qualitative and quantitative measures. The use of qualitative measures is widened as the contracting authorities gain more and more experience on that part. However, there is almost always some sort of quantitative measure that produces a final score for each tender. Konkurrensverket stresses that both contracting authorities and tenderers find the mathematics of the evaluation models hard, which leads to complaints not on the model itself, but on the use of it.

© 2014 Deloitte

6. Methods and models for tender assessment – the UK National regulation, guidelines and other supporting tools of tender assessment in the UK Regulation on award criteria and evaluation models The subject of award criteria is regulated by regulation 30 in part 5 of the Public Contracts Regulation 2006 on the award of public contracts. Evaluation models in public procurement are not regulated by UK law.

Guidelines and supporting tools There are no guidelines or supporting tools on award criteria or evaluation models in the UK. This is due to the fact that award criteria and evaluation models are not generic, but relate to the specific contract.

Regulation 30 on award criteria is a direct transposition of the rules on award criteria in the current directive. Hence, the regulation makes clear that the sub-criteria are to be linked to the subject of the contract and that the sub-criteria are to be clear and understandable for the tenderers. From this follows that the award criterion, sub-criteria and weighting are to be announced to tenderers to the extend that these affect the ability of the tenderer to prepare the tender.

With regard to complaints, the Cabinet Office has launched the supporting tool Mystery Shopper, which is described just below.

With regard to evaluation models, there are no specific rules in UK law as in EU regulations on evaluation methods or processes. The contracting authorities are free to use an evaluation model of their choice as long as this follows the award criterion, sub-criteria and weighting announced to tenderers prior to the tender assessment. There is no obligation for contracting authorities to announce the used evaluation model prior to tender assessment. However, the contracting authorities are to be able to account for the evaluation model and justify their decision when asked by the court. This can be done in a number of ways, i.e. by recording the proceedings, but there is no regulation on which information should be recorded on either the evaluation method or the evaluation process. Enforcement of obligations is regulated by regulation 47 in part 9 of the Public Contracts Regulation 2006 on applications to the court. From this follows that victims of a breach of procurement law can either bring high court proceedings or file a complaint to the Commission.

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Mystery Shopper The Mystery Shopper scheme allows tenderers to anonymously raise concern on public procurement processes. The Cabinet Office investigates the cases raised and where necessary makes recommendations and publish the case on gov.uk. The Cabinet Office also carries out spot checks on procurement processes. The objective of the Mystery Shopper scheme is to raise the commercial capability of contracting authorities through their adoption of good procurement policy and practice. Through the investigation of raised cases and spot checks, the Cabinet Office can control contracting authorities’ compliance with EU regulation on public procurement and ensure that unnecessary barriers are not imposed on SMEs when tendering for public contracts. Furthermore, the Mystery Shopper scheme provides unsuccessful tenderers with a way of expressing their discontent with the procurement process without having to file a complaint or take formal legal proceedings.

Both CBI and the Cabinet Office express great content with the Mystery Shopper scheme. However, CBI stresses that the Mystery Shopper scheme is not properly marketed to private suppliers, which results in a large number of private suppliers being unaware of the possibility to raise concerns without filing a complaint and not trusting the Cabinet Office to control contracting authorities. © 2014 Deloitte

6. Methods and models for tender assessment – the UK The current use of tender assessment models in the UK Use of award criteria and evaluation models With regard to award criteria, the use of the lowest price is limited in UK (Treumer 2013). However, CBI stresses that private suppliers perceive lowest cost as the most used award criterion. This follows from the fact that the public sector is under a lot of pressure to minimise costs. The Cabinet Office acknowledges that even though MEAT is the most used award criterion, the contracting authorities are first and foremost focused on value for money. This can be perceived as attaching great importance to the price as award criterion. CBI finds the emphasis on price to be a problem in relation to LCC as the contracting authorities often choose the cheapest tender at the time of procurement, not taking into consideration costs in the longer run.

Use of formal proceedings, complaints and Mystery Shopper Individual companies are averse to face the costs of formal proceedings as the likely consequence of a challenge is re-tendering of the contract. There is therefore no guarantee that the company will benefit from the proceeding even though they win the case. There are no appeals board for public procurement, and complaints can only be directed at the contracting authority itself. This option is rarely used by tenderers, and CBI stresses that tenderers distrust the contracting authorities to control themselves. The Mystery Shopper scheme has been received well by tenderers. However, not all suppliers are aware of this possibility to express concern with a procurement process, and there is some distrust towards the Cabinet Office’s ability to control contracting authorities.

With regard to the evaluation of tenders, this is carried out by the contracting authority, typically using a scoring model. The Cabinet Office stresses that the award criterion, sub-criteria and weighting model are generally announced prior to tender assessment. However, the specific scoring model is not announced. According to the Cabinet Office, the scoring model is only disclosed in connection with the feedback given to tenderers when the contract is awarded. According to Treumer, the lower the value of the contract, the simpler the evaluation model (e.g. scoring 1-10 for each criterion). More complex procurement projects use more advanced mathematical scoring models. UK case law shows examples on flawed mathematics models when challenged by an unsuccessful tenderer (Treumer 2013).

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6. Methods and models for tender assessment – the UK Transposition strategy and interpretation of the new directive in the UK Perceived possibilities and constraints The Cabinet Office stresses that the contracting authorities will continue to be focused on value for money when choosing award criteria. Therefore, award criteria are not expected to change significantly with the new directive. However, LCC is expected to be of greater concern to contracting authorities when assessing tenders in the future. CBI stresses that the new award criteria can prove to be a challenge for foreign suppliers as the contracting authorities are free to set subcriteria to their own choice not related to the product or service being procured. This gives way for contracting authorities to set sub-criteria, which can only be met by local suppliers or provide preferential treatment to local suppliers.

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Transposition process and strategy According to the Cabinet Office, the new regulation transposing the new directive is not expected to limit the sub-criteria available for contracting authorities.

The focus of the Cabinet Office when transposing the new rules on EU public procurement is to give the contracting authorities as much flexibility as possible in choosing the procurement strategy and hence evaluation model best suited to their needs under the new directive.

© 2014 Deloitte

6. Methods and models for tender assessment – the Netherlands National regulation, guidelines and other supporting tools of tender assessment in the Netherlands Regulation on award criteria and evaluation models With the introduction of the Public Procurement Act 2012 and the Proportionality Guide, contracting authorities are required to use MEAT for European and national (within the public works sector) procedures unless it can be motivated to apply the lowest price.

Guidelines and other supporting tools A lot of guidelines and supporting tools exist for the application of MEAT in the procurement process.

The lowest price can be applied when the procured product/service is highly standardised, or when no major differences in quality are expected, or the specifications and scope of the procured contract are clear.

Rijkswaterstaat – one of the role models when it comes to the effective application of MEAT in procurements – has developed a specific guideline and scoring model. The scoring model is based on the attachment of value (in terms of price) to the different sub-criteria.

At the moment, there is a court case running to decide whether the requirement to use MEAT is met with a 90/10% weighting between price and quality. It is expected that this does not qualify as MEAT. When applying MEAT, the different sub-criteria are to be announced with the publication. The weighting of the different sub-criteria and the assessment method can be announced later in a procurement process with prequalification. The Proportionality Guide requires contracting authorities to be transparent about the weighting of different sub-criteria.

PIANOo has developed guidelines, examples and a checklist for applying MEAT.

Awarding on value (Gunnen op waarde) is another method of applying MEAT, which is highlighted by, among others, Bouwend Nederland as effective and transparent. A guideline, an e-learning module and a digital library with sub-criteria and how to use them are available at www.crow.nl. CROW is an independent knowledge platform.

With regard to complaints, the Public Procurement Act 2012 introduced a lighter complaints regime with the purpose of preventing court proceedings supplementing the civil courts.

References • PIANOo 2014: Tips. EMVI toepassen

Competent authorities are encouraged to set up informal complaints review commissions to address complaints.

• Kennisinstituut van werken (CROW) 2007: Gunnen op waarde. Hoe doe je dat

In addition, the National Public Procurement Expert Commission has been established to process complaints handing out non-binding advice to contracting authorities and tenderers.

• PIANOo 2012: Hoe pas je EMVI toe? • Rijkswaterstaat 2011: Handleiding EMVI Rijkswaterstaat • EMVI-criteriabibliotheek op crow.nl

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6. Methods and models for tender assessment – the Netherlands The current use of specific tender assessment models in the Netherlands Use of assessment models and methods Since the introduction of the Public Procurement Act 2012, there has been a major shift in terms of which award criteria are applied. From 2008 to 2010, 10% of tenders (20% within the public works sector) were awarded based on the lowest price. Today, this is 95% and 80%, respectively. The lowest price used to be the standard award criterion used for standard/smaller contracts, particularly by regional authorities and municipalities. The requirement to motivate the application of the lowest price is an issue because both contracting authorities and tenderers experience increased transaction costs when applying MEAT. According to PIANOo, the method awarding on value developed for the public works sector is used in 85% of tenders. The shift towards using MEAT is generally seen as positive. Although it results in higher transaction costs, it increases the possibility to focus on quality. Some contracting authorities (Rijkswaterstaat is again a role model) are actively combining policy goals (for instance about sustainability and the least traffic disruption) to their application of MEAT. Some municipalities are having an official policy to use the lowest price for all tenders under EUR 100,000.

Use of complaints Around 250 procurement cases were decided by the Dutch courts in 2012. Almost all of these cases concerned summary proceedings in which provisional measures were requested. In many cases the claim was based on the argument that the tender guidelines or the award criteria were unclear or that the tender guidelines were unlawfully amended during the procurement procedure. No data from 2013 have been found. The impression is that most complaints that go to court are concerned with the way contracts are awarded. According to Ministerie van Economische Zaken, the experience from the first year with the new complaints regime is promising. The National Public Procurement Expert Commission has processed 84 complaints in its first year of operation. Some complaints brought before the Commission have also been taken to court. In these cases, the courts have followed the advice from the Commission. There are no specific data to suggest if there are less cases going to court compared to previously. Bouwend Nederland acknowledges that there is a need for a more specialised juridical complaints processing. They see jurisprudence which goes in different directions.

Although there is a rather long tradition for working with specific evaluation models there is - according to both PIANOo and Bouwend Nederland – still a need among regional authorities and municipalities to develop knowledge and methods to apply MEAT. According to Bouwend Nederland, many tenderers find the actual scoring not transparent. The problem is not regulation, but the lack of expertise by contracting authorities to apply MEAT. 33

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6. Methods and models for tender assessment – the Netherlands Transposition strategy and interpretation of the new directive in the Netherlands Perceived possibilities and constraints According to PIANOo, the access to work with full lifecycle costs when assessing tenders is an interesting new possibility. It does, however, require a proven method for estimating the full lifecycle costs. This method is expected to be developed by the European Commission. Transposition process and strategy Most changes following from the new procurement directive concerning tender assessment were anticipated with the Public Procurement Act 2012, therefore no significant changes are expected.

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6. Methods and models for tender assessment – key points Regulation Both Sweden and the UK have directly transposed the rules on award criteria into national law, and no further regulation of award criteria or evaluation models has been added. The public procurement principles (equal treatment, transparency etc.) and case law guide the tender assessment. However, no guidelines or supporting tools support the tender assessment process. In the Netherlands, there is a general requirement to use MEAT unless the contracting authority can motivate the use of the lowest price, and there are a number of elaborate supporting tools and practical guidelines available. With regard to complaints, neither of the three countries has an appeals board for public procurement complaints. In the UK, tenderers can direct their concerns of any procurement breaches to the Cabinet Office instead of complaining or making legal proceedings. In the Netherlands, the new National Public Procurement Expert Commission has been established, which gives non-binding advice to complaining tenderers.

Practice Announcement of award criteria is an important part of the procurement process in both Sweden, the Netherlands and the UK. This leads to award criteria being perceived as clear by the tenderers.

Transposition In both Sweden and the UK, the new directive is to be directly transposed into national regulation. No plans are made to put forward further regulation of either award criteria or evaluation models.

With regard to evaluation models, announcement prior to the tender assessment is not required in any of the three countries, and there is furthermore no practice hereof. In the Netherlands, tenderers still find the actual scoring not transparent, which is related to the lack of expertise, especially in regional authorities and municipalities, to apply MEAT properly.

No initiative is introduced to put forward guidelines or other supporting tools. With regard to the new directive, both countries wish to promote the use of LCC as award criterion. Private-sector representatives express concern related to the disconnection of the award criteria from the subject of matter. They fear this will enable the contracting authorities to favour local suppliers harming competition.

In all three countries, MEAT is the most used award criterion. The lowest price is used for procurement of simple goods and services. However, the focus on value for money often puts great emphasis on price even when using MEAT. Also, evaluation models are only quantitative when using both quantitative and qualitative measures. The mathematics of the scoring models trouble contracting authorities as well as tenderers in all three counties.

In the Netherlands, most changes following from the new procurement directive concerning tender assessment were anticipated with the Public Procurement Act 2012, therefore no significant changes are expected.

Overview

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 = High relevance  = Some relevance  = No relevance

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7. Reduction of transaction costs – introduction Background and special focus theme III: reduction of transaction costs Background The reduction of transaction costs regards the transaction costs for both contracting authorities and tenderers. The new directive contains a number of aspects with the purpose of reducing the overall costs of public tendering for both the contracting authorities and the private suppliers. • Reduced demands for documentation from tenderers • E-procurement procedures • Increased possibilities for shared tendering by several contracting authorities At the same time, there are certain changes following from the new directive that could also lead to increased transaction costs depending on the way it is transposed. • Requirements for contracting authorities to consider if contracts can be divided into smaller portions, which allows the participation of newly established companies and SMEs.

Specialfocus focus Special According to the findings of the Danish Productivity Commission, contracting authorities and tenderers are experiencing rather high transaction costs related to the procurement process. The transaction costs are – among other things – related to a timeconsuming process and the management of risks. To be used as inspiration for the ongoing Danish transposition of the new directive, the study is focused on the following aspects: • What is best practice in the three countries on how to reduce transaction costs for private suppliers as well as for contracting authorities? • Are there any inspirational plans in the three countries on how to use the changes in EU regulation to reduce transaction costs in public procurement?

• Greater options and new routes to procurement with more complex procedures with negotiations. • Wider access to include selection and award criteria that take social and environmental aspects into account. Transaction costs overview The figure provides an overview of experience and specific solutions that might be relevant as inspiration for the Danish transposition with regard Regulation to reduction of transaction costs. Practice The relevant key points will be summed up on page 42. The findings Transposition from which the key points are concluded will be presented in the following section.

 = High relevance

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 = Some relevance

 = No relevance © 2014 Deloitte

7. Reduction of transaction costs – Sweden National regulation, guidelines and other supporting tools, current use and transposition of transaction costs in Sweden Regulation on transaction costs There is no regulation on the reduction of transaction costs in LOU. However, Sweden has a strong focus on reducing transaction costs, and this has been on the agenda for some time. This has resulted in a number of initiatives to reduce transaction costs, i.e. minimising the documentation that private suppliers need to provide when tendering for public contracts. According to Konkurrencverket, there has been discussions on raising the national thresholds put forward by the Swedish regulation of public procurement under the EU threshold to reduce transaction costs for especially SMEs and local suppliers. This will probably result in the introduction of a new bill in the near future. Guidelines and supporting tools A range of guidelines are available from Upphandlingsstödet on best practice in public procurement.

Perceived possibilities and constraints There is an increasing focus on making the procurement process accessible for SMEs. In relation to this, the Swedish Agency for Economic and Regional Growth (Tillväxtverket) has a programme for SMEs making it easier for them to understand and comply with the rules governing public procurement. SN stresses that both contracting authorities and private suppliers think of the EU public procurement regulation as not effective. There is a low-intensity debate going on in Sweden arguing that the rules are driving costs and delivering poorer results, and that this outweighs the benefits of less corruption, especially for more complicated procurement situations. From the SN’s point of view, the EU regulation on public procurement is not celebrated in Sweden.

Upphandlingsstödet has since March 2014 been a part of Konkurrensverket, and therefore Konkurrensverket is now responsible for the guidelines regarding the reduction of transaction costs. Konkurrensverket expects to review the existing guidelines, but there are no specific plans to introduce new guidelines or take further initiatives to reduce transaction costs. Transposition process and strategy There are no specific plans to introduce new guidelines or take further initiatives to reduce transaction costs in Sweden.

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References • På jakt efter den goda affären – analys och erfarenheter av den offentliga upphandlingen, Delbetänkande av Upphandlingsutredningen 2010 • Goda affärer – en strategi för hållbar offentlig upphandling, Slutbetänkande av Upphandlingsutredningen 2010

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7. Reduction of transaction costs – the UK Initiatives in national regulation, guidelines and other supporting tools to reduce transaction costs in the UK Regulation on transaction costs Public Contracts Regulation 2006 provides no regulation on the reduction of transaction costs. However, over the last few years, the reduction of transaction costs for both contracting authorities and private suppliers has been high on the agenda and has led to a range of guidelines and supporting tools with the objective of reducing transaction costs.

Guidelines and supporting tools The Procurement Pledge is an agreed understanding between government and potential providers setting mutual claims with the objective of: • Providing greater certainty of future demands. • Identifying and addressing strategic capabilities in supply chain to prepare to meet future demands. • Developing a more strategic relationship with providers. • Supporting UK business when tendering for contracts overseas. The Standard LEAN Sourcing Solution is a repeatable step-by-step process designed to reduce turnaround times and the cost of resources required to run successful procurements using open, restricted and competitive dialogue procedures. Contracts Finder that holds information on pipeline of future public procurement, current contracts over GBP 10,000 and closed contracts from October 2010.

References • The Lean Sourcing Approach, Cabinet Office • Getting Better Purchase, CBI 2014 Public Sector Procurement Report • Procurement Pledge, Cabinet Office Apr 2012

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Solutions Exchange is an online tool enabling two-way conversation between government and SMEs before formal procurement where government buyers post challenges about what they need to buy in future and SMEs propose innovative themes (solutions) to save money and improve public services. Crown Representative is a network of government’s key suppliers who act as a link between the market and government identifying areas of cost saving and communicating the government’s needs to the market, leading negotiations of government-wide deals etc.

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7. Reduction of transaction costs – the UK The current initiatives to reduce transaction costs, the transposition strategy and the interpretation of the new directive in the UK Transparency To lower the transaction costs for all private suppliers in public procurement, the central government has adopted an open-door policy to enable industries to discuss requirements pre-procurement. This can help improve the procurement process by adapting the contracts to the possibilities and constraints in the market. In 2012, a new online tool was launched to help contracting authorities engage earlier with SMEs by allowing them to put forward informal postings about what they will need to procure in future and for SMEs to respond and explain what they will be able to offer. Providing industries with greater visibility of government demand through publishing rolling pipelines of upcoming procurement opportunities and the capabilities needed to deliver these provide more firms with the possibility to tender for public contracts. Furthermore, pre-procurement market engagement enables the contracting authority to use more simple procurement procedures, thus reducing the time and effort used by private suppliers to tender for public contracts.

Transaction costs According to CBI, transaction costs are perceived as a barrier to SMEs to take part in public procurement. There is a strong political focus on lowering transaction costs, allowing more SMEs to win public contracts. A range of initiatives have been made to make public procurement procedures more accessible to SMEs. The Cabinet Office stresses that there is no clear evidence of which initiatives are the most effective. One initiative is the promotion of wider use of the open procedure with per-procurement market engagement instead of the more time consuming and complex competitive dialogue procedure as explained in relation to the flexible procedures above. Another initiative is the lean procurement process using the best practice for each product. The UK government has mandated the adoption of lean sourcing principles across the central government procurement from January 2012. This helps to lessen the administrative burden on SMEs and thereby makes public procurement more accessible.

Interpretation and transposition of the new directive No plans are made to take further initiatives to reduce the transaction costs in public procurement in the UK. As stressed by the Cabinet Office, the current agenda to reduce transaction costs for both contracting authorities and private suppliers is a strong priority for the present government. Further initiatives await the agenda of the new government elected in 2015.

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7. Reduction of transaction costs – the Netherlands National regulation, guidelines and other supporting tools in the Netherlands Regulation on transaction costs One of the main policy goals of the Public Procurement Act 2012 was to reduce the transaction costs for tenderers. The main changes introduced to achieve this goal were: • Standard self-declaration form (Eigen Verklaring).

• All public tenders are to be published on TenderNed, which makes it easier for companies to keep track of relevant tenders. • The digital process support offered by TenderNed (delivering the tender, communication, archiving). • Tender documents are to be available free of charge. • The introduction of the Proportionality Guide as binding policy. At the same time, some of the changes following from the Public Procurement Act 2012 could potentially lead to increased transaction costs. Most notably, this could be the case with the requirement to use MEAT as standard award criterion as mentioned above. The expected reduction of transaction costs with the introduction of Public Procurement Act 2012 was around 12-13% (see SIRA Consulting 2009). For the Proportionality Guide specifically, there are additional expected cost reductions close to EUR 13m per year for private suppliers and approximately EUR 5m per year for contracting authorities, mostly due to the shift towards less complex procedures.

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Supporting tools With the self-declaration form, tenderers declare that they meet certain requirements. Documentation is only needed from the enterprise awarded the contract. The Standard Cost Model (SKM) for estimating the transaction costs for the different procurement procedures was developed in cooperation with SIRA Consulting in 2005. Based on 60 interviews, the processes forming the different procurement procedures have been mapped and price-tagged, making it possible to estimate the transaction costs of the different types procedures and the total transaction costs. The Standard Cost Model has subsequently been used to estimate the expected reduction of transaction costs with the new regulation based on the expected procedural changes and changes in the use of the different procedures. References • Self-declaration for public procurement procedures by contracting authorities (available at www.pianoo.nl) • SIRA Consulting 2009: Rapportage Lastenontwikkeling Aanbesteden • SIRA Consulting 2012: Lasteneffecten van de Gids Proportionaliteit

© 2014 Deloitte

7. Reduction of transaction costs – the Netherlands The current initiatives to reduce transaction costs and the transposition strategy in the Netherlands Effects No estimations have been made yet with regard to the reduction of transaction costs due to the Public Procurement Act 2012 and the Proportionality Guide. According to Bouwend Nederland, the regulatory changes in 2013 have led to fewer open procedures and increased the number of closed procedures (below the thresholds) and procedures with prequalification instead. This has led to a reduction of the transaction costs for tenderers. At the same time, the understanding is that the increased application of MEAT has led to an increase in transaction costs for tenderers.

Perceived possibilities and constraints With the greater options and new routes to flexible procurements, there is a risk of increase in transaction costs, but this is also balanced by the likely better quality of contracts/delivery of products and services. However, it is pointed out that these procedures are not necessarily more costly if focus in the pre-phases is on the discussion of ideas rather than of plans. According to Bouwend Nederland, there is a possibility in the directive to limit what can be asked for in the prephase of the flexible procedures (for instance detailed project design and plan of action).

There are different opinions as to whether the changes have led to a reduction of transaction costs for contracting authorities. The application of MEAT and the requirement to motivate choice of procedure could have had a negative impact on transaction costs for contracting authorities.

According to Bouwend Nederland, the period from 2008 to 2012 saw lesser contracts because of the economic crisis. At the same time, an increase in the use of open procedures led to high transaction costs for private suppliers. This again led to what is described as a fighting culture between private suppliers and contracting authorities with a lot of complaints about the procurement procedure as well as discussions of small details in the contract once it was awarded and delivered.

According to Bouwend Nederland, the skills and expertise to carry through procurement and contract management in an efficient way are decreasing. More and more tendering at the municipal level is conducted by external consultants.

Some of the changes in 2012 and again some of the changes following from the new directive are providing better opportunities for cooperation and dialogue between private suppliers and contracting authorities, which is expected to have a positive impact on transaction costs.

Experience with the Proportionality Guide The Proportionality Guide is offering much more specific definitions of what is understood by proportionality. Proportionality was seen as a difficult and poorly defined principle, which led to quite a number of court cases about selection criteria, wrong procedure etc. The Proportionality Guide has not yet been evaluated, but according to PIANOo, the experience so far with the Proportionality Guide is positive although some contracting authorities find it difficult that they need to motivate choice of procedure, selection criteria etc.

Transposition process and strategy According to Ministerie van Economische Zaken, it is probably rather limited what new regulation or new initiatives will be introduced to reduce transaction costs further since most of the initiatives introduced with the Public Procurement Act are still under implementation.

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According to Bouwend Nederland, there is a need for a more clear compensation policy than what is the case with the Proportionality Guide. An important issue is the proportionality between the value of the contract and the way MEAT is applied. In many cases, these two are not proportionate. © 2014 Deloitte

7. Reduction of transaction costs – key points Regulation The reduction of transaction costs is not regulated in the national regulation of public procurement in neither Sweden nor the UK. However, a range of guidelines and supporting tools are put forward to help reduce transaction costs. In the Netherlands, the reduction of transaction costs was a key policy goal with the new regulation introduced in 2013 with a number of specific regulatory changes (selfdeclaration form, use of TenderNed and the Proportionality Guide) introduced which were estimated to deliver cost reductions of more than 12%. In Sweden, a project gathers best practice on public procurement. Furthermore, the documentation requirements put on tenderers in public procurements are being reduced. In the UK, a reform has been made to reduce transaction costs and make public procurement accessible to SMEs. Among other initiatives in the reform are a lean approach, online procurement systems and engagement of the private sector.

Practice In both Sweden and the UK, the SMEs’ ability to participate in public procurement has been high on the agenda the last few years. A range of initiatives have been put forward to eliminate the barriers for SMEs to take part in public procurement. There is no evidence yet of the effect of the initiatives. In the Netherlands, the actual cost reductions with the new regime have not yet been estimated. The regulatory changes seem to have led to fewer open procedures and instead increased the number of processes with invitation. This has led to a reduction of the transaction costs for tenderers. At the same time, the understanding is that the increased application of MEAT has led to an increase in transaction costs for tenderers.

Transposition In both Sweden and the UK, the new directive is to be directly transposed into national regulation. No plans are made to put forward any additional regulation to lower the transaction costs. In the UK, there are no specific plans to put forward new guidelines or other supporting tools. In the Netherlands, the number of new regulation and new initiatives being introduced to reduce transaction costs further is very limited since most of the initiatives introduced with the Public Procurement Act are still under implementation. According to Bouwend Nederland, there is a possibility that the new possibilities regarding flexible procedures may lead to increased transaction costs. A limitation to what can be asked in the pre-phase is seen as a solution.

In Sweden, Konkurrensverket plans to develop an online procurement system supporting end-to-end procurement processes.

Overview

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8. The light regime – introduction Background and special focus theme IV: the light regime Background The current light regime covers procurement of IIA service contracts below the thresholds as well as procurement of all IIB service contracts. Basic norms and principles such as fairness, equal treatment, transparency etc. apply to all procurements above and below the thresholds. It is up to each member state to ensure that basic norms and principles are adhered to and to further regulate procurements below the thresholds or procurements of IIB services according to national goals and policies.

Special focus In Denmark, the Danish Competition Act (700/2013) also regulates the procurement of IIA services below the thresholds and IIB services.

The new directive replaces IIA and IIB with a full regime and a light regime. The light regime covers the former IIB services and some additional service categories.

• Are there any inspirational plans in the three countries on how to regulate public procurement within the newly defined light regime and ensure effective implementation?

The thresholds for when the directive applies are kept at the same level within the full regime, but are raised to EUR 750,000 for the light regime. There are no procedural rules for the light regime apart from the obligation to treat tenderers equally, the (new) requirement for contracting authorities to publicise in advance their intention to award contracts and to announce the contract award decision after the procedure.

• How is procurement regulated below the thresholds and for the IIB service contracts?

To be used as inspiration for the ongoing Danish transposition of the new directive, the study is focused on the following aspects: • What is best practice in the three countries on public procurement regulation within the newly defined light regime and effective implementation of this regulation?

It should be noted that the findings on regulation and practice concern the regulation of procurement below the threshold and for the IIB service contracts put forward by the current directive. The findings on transposition concern the new light regime.

The light regime overview The figure below gives an overview of experiences and specific solutions which might be relevant as inspiration for the Danish transposition with regard to the light regime. Regulation The relevant key points will be summed up on page 48. The findings from Practice which the key points are concluded will be presented in the following Transposition section.  = High relevance

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 = Some relevance

 = No relevance

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8. The light regime – Sweden Current regulation, current practice and transposition strategy for public procurement excluded from the current directive in Sweden The regulatory framework below the thresholds Chapter 15 of LOU contains procedural rules for public procurement below the thresholds (among other things). These rules are referred to as Sweden’s national procurement rules. The procurement procedure for contracts below the thresholds is very similar to the open procedure. A procedure comparable to the negotiated procedure is also available below the thresholds, but is very rarely used. Furthermore, LOU puts regulations into place preventing the misuse of the current directive such as cutting up contracts into smaller parts and claiming that each part is a unique procurement falling below the thresholds. With regard to guidelines, there is information available from Kammarkollegiet and Konkurrensverket on when public procurement is excepted from EU regulation on public procurement. With regard to supporting tools, there are a number of procurement portals provided by private suppliers with information on live procurement or contract information. There is no national database. When announcing a procurement, the contracting authorities can ask for the information to be shared between procurement portals. However, this is not always done, and Konkurrensverket is therefore developing one shared portal. Transposition process and strategy According to Konkurrensverket, the new light regime is not expected to make any big difference in practice.

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8. The light regime – the UK Current regulation, current practice and transposition strategy for public procurement excluded from the current directive in the UK The regulatory framework below the thresholds There is no regulation on public procurement below the thresholds in UK law. Public Contracts Regulation 2006 only transposes the rules on IIB services available in the current EU public procurement regulation. With regard to guidelines and supporting tools, Contracts Finder and eMarketplace can be used to find live contracts below the thresholds. Furthermore, contracting authorities use eMarketplace to find private suppliers when they spot procurements of goods and services below the thresholds. With regard to public sector procurement, which do not fall within the directive, the principles of transparency and equal treatment will generally require private suppliers to have access to suitable information about the intent of the contracting authority to award the procurement. This means that there needs to be some form of advertising at the outset and disclosure of the procurement of at least basic information about all elements of the proposed procurement accessible to all (potential) tenderers. Transposition process and strategy According to the Cabinet Office, there is no expectation of adding further regulation of procurement below the thresholds as the Government wants to avoid adding regulation where it is not required. Guidelines are expected to be made accessible to private suppliers as the light regime introduces new rules to be followed in specific procurement procedures. The contents have not yet been decided on.

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Cutting up contracts No statistics are available on how many of the contracts below the thresholds are exposed to competition. According to both the Cabinet Office and CBI, cutting up contracts has been used as a strategy to lower the size of the contracts making them more accessible to SMEs. However, the Cabinet Office stresses that this is not a practice put forward to except contracts from the EU public procurement regulation. The general contract size is much bigger in the UK compared to other member states, so even when cutting up contracts, they are still above the thresholds. CBI stresses that the downside of this practice is that contracting authorities have to handle a large number of contracts, and that the responsibility for integrating or coordinating different services from different suppliers is once again to be handled by contracting authorities.

Furthermore, the capacity for firms to win more than one contract may be limited, which harms the commercial value of public procurement and risks that large suppliers are not interested in tendering for public contracts. As a consequence, the contracting authorities can miss out on experience and competences from private suppliers, the tender may be less economically efficient due to less economies of scale, and risk may be added to the public procurement.

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8. The light regime – the Netherlands Current regulation and practice for public procurement excluded from the current directive in the Netherlands Regulation and policy Part one of the Public Procurement Act 2012 as well as the Proportionality Guide cover the procurement of all public contracts above and below the thresholds. Most notably, this concerns the following: • The basic principles from the European procurement directive. • The requirement not to combine contracts without proper reason. • The requirement of a written motivation (for instance procedure and choice of invited tenderers). • Administrative requirements such as the use of TenderNed and an obligation to limit transaction costs for tenderers. Four additional national procurement procedures exist that are applicable below the IIA thresholds and for the IIB services, all with a more limited amount of formal requirements: • Closed procedure for one invited tenderers. • Closed procedure for several invited tenderers. • Open national procedure. • Voluntary transparency by awarding (announcement of intention to award a minimum of 15 days before signing of contract).

Guidelines and supporting tools PIANOo offers short explanations of the different national procedures as well as a guide to suppliers about motivation of choice of procedure and choice of invited tenderers. The are no specific guidelines for the four national procedures.

Procedures and contracts There are not a lot of data about procurement under the light regime because of the less formal requirement. According to PIANOo, 95% of the public contracts are either below the thresholds or falling under the lighter IIB regime. In terms of contract value it is 80%. According to Bouwend Nederland, there is a trend within the public works sector towards larger contracts and more contracts procured through closed procedures. An example is Den Bosch municipality that has changed its procurement policy from open procedure for all contracts above EUR 200,000 to closed procedure for all contracts below EUR 1.5m.

There are no general regulations for the procurement of the current IIB contracts, but the Public Procurement Rules for Public Works 2012 (ARW 2012) regulates the procurement of IIB contracts within the public works sector. There is no legal requirement to publish (pre)announcements of procurements below the thresholds. If a contracting authority chooses to (pre)announce such procurements, it is, however, a requirement to do this through TenderNed.

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8. The light regime – the Netherlands Transposition strategy and interpretation of the new directive in the Netherlands Perceived possibilities and constraints According to Ministerie van Economische Zaken, the new requirement to announce that a IIB contract above the thresholds will be awarded as something that can lead to challenges for a lot of local authorities. There is a large structural reform under implementation in the Netherlands where a lot of health and social services are moved to the municipal level. This leads to smaller contracts for health and social services within the light regime. It is in this context that this challenge is to be understood. Transposition process and strategy The general interpretation is that the new procurement directive puts further requirements on the member states to enforce the general rules and principles for procurement below the thresholds and for the special services under the new light regime. This is most likely to lead to an increase in transaction costs for procurement below the thresholds. At the same time, there is a general understanding that most of these requirements already form part of the present regulation and policy introduced in 2013, and that the new directive will therefore only lead to minor changes for procurement below the thresholds and within the light regime.

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8. The light regime – key points Regulation The national regulation on public procurement below the EU thresholds differs very much between the three countries. In Sweden, LOU contains procedural rules for public procurement below the thresholds referred to as Sweden’s national procurement rules. Guidelines are put forward to support contracting authorities. Furthermore, a number of different procurement portals are provided by private suppliers. The UK has no regulation on public procurement below the thresholds. The procurement portal eMarketplace supports procurements below the thresholds. In the Netherlands, part of the regulation covers the procurement of all public contracts above and below the thresholds (most notably the requirement not to combine contracts, to motivate choice of procedure and invited tenderers and the use of TenderNed) and introduces four additional national procedures.

Practice It follows from the very different regulation in the three countries that also the practice of public procurements below the thresholds differs widely. In Sweden, the national regulation provides specific rules on how procurements below the thresholds are to be completed giving both contracting authorities and private suppliers a transparent process. In the UK, the contracting authorities are free to chose whether to announce a procurement and go through with a procurement process or to do a spot procurement. Cutting up contracts has been used as a strategy to lower the size of the contracts making them more accessible to SMEs. In the Netherlands, procurement below the thresholds is less restricted in terms of procedural requirements with no legal requirement to publish (pre)announcements of procurements below the thresholds. This results in a high proportion of closed procedures.

Transposition In the UK, the use of guidelines in addition to the new regulation of the light regime is currently being considered as there has been no regulation below the thresholds so far. In Sweden, the new directive is not expected to induce a significantly different practice of public procurement below the thresholds. In the Netherlands, there is a general understanding that most of the new requirements for procurement under the light regime and below the thresholds already form part of the present regulation and policy introduced in 2013.

Overview

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 = High relevance  = Some relevance  = No relevance

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Carsten Jørgensen Partner  25 24 00 44 [email protected]

Betina Nørgaard Manager  30 93 61 70 [email protected]

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